PRICING NOTICE: Proposal to launch standalone iron ore pellet premium index

Fastmarkets is proposing to launch a weekly iron ore pellet premium index to reflect the spot premium that “tier one” pellets achieve to its 65% Fe fines index on a cfr China basis. This would replace its existing implied pellet premium, which would be subsequently discontinued.

Fastmarkets’ proposal follows initial feedback during February’s open consultation on its iron ore methodologies that clearer representation of pellet market price points reflecting prevailing pricing practices would be of value to the market.

Fastmarkets currently publishes a cfr China 65% Fe blast furnace pellet index and a cfr China implied pellet premium to 65% Fe fines, which is a derived number calculated from subtracting the weekly average of Fastmarkets’ 65% Fe Brazil-origin fines index from the weekly blast furnace pellet index.
Under this new proposal, Fastmarkets would launch a standalone pellet premium index reflecting the premium that top-quality international pellets achieve over its 65% Fe fines Index on a cfr China spot basis. This would replace its existing implied pellet premium, which would be discontinued.

These proposed changes aim to satisfy demand from market participants to more clearly and transparently track the premium that higher-quality international pellets can achieve on a cfr China spot basis, where they are most commonly traded with a fixed premium negotiated to the Fastmarkets 65% Fe fines Index. China’s growing appetite for higher-quality iron ore, including pellets, is seeing an increase in the frequency of top-tier pellet cargoes being sold on this basis that market participants expect will continue into the future.

The proposed specifications for the new pellet premium index are as follows:

Index: Iron pre pellet premium over 65% Fe fines, cfr China
Quality: Fe: base 65%, min 64.5%; Si: base 4.5%, max 6.0%; Al: base 0.4%, max 0.6%; P: base 0.03%, max 0.05%; S: base 0.01%, max 0.02%; Moisture: base 2.0%, max 3.0%; CCS: base 230 daN, min 220 daN; Sizing: <5% <5.0mm
Quantity: min 10,000 tonnes
Location: cfr Qingdao (other main sea ports normalized)
Timing: delivery within eight weeks
Unit: $ per dry metric tonne
Publication: Weekly on Friday, 6.30pm Singapore time

The consultation period for this proposed launch and discontinuation starts on Wednesday March 3 and will end on Monday May 3. The changes will take place, subject to market feedback, on Friday May 7.

To provide feedback on this proposal or if you would like to provide price information by becoming a data submitter to these prices, please contact Peter Hannah by email at: pricing@fastmarkets.com. Please add the subject heading “FAO: Peter Hannah, re: Iron Ore Pellet”.

To see all of Fastmarkets’ pricing methodology and specification documents, go to www.fastmarkets.com/about-us/methodology.
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